Crypto revolution in danger: CLARITY Act could overtake USA!

Crypto revolution in danger: CLARITY Act could overtake USA!

An alliance of crypto companies led by Coinbase is increasingly pushing for the passage of the CLARITY Act in the US Congress. This bill aims to create clear responsibilities for the regulation of digital assets and free the industry from its legal gray area. In total, 65 companies and advocacy groups support the rapid adoption of the bill, which would hand oversight of most of the crypto market to the Commodity Futures Trading Commission (CFTC).

In return, the Securities and Exchange Commission (SEC) would only have jurisdiction over products that are classified as securities. The urgency of the situation is underscored by industry concerns that the US could lose its leadership role in the crypto space. A lack of standardized rules not only inhibits institutional acceptance but also innovation within the sector.

Political context and progress

House Republican leaders have announced that the CLARITY Act and two other crypto bills will be considered the week of July 14th. This includes the GENIUS Act to regulate stablecoins and a ban on central bank digital currencies (CBDC). However, Senate Democrats have blocked quick passage of the GENIUS Act and are raising concerns about the CLARITY Act. Maxine Waters called the CLARITY Act rushed and complicated, which could exempt potentially risky activities in the crypto sector from oversight.

The House Financial Services and Agriculture Committees have already passed the bipartisan CLARITY Act (H.R. 3633). The Finance Committee voted 32-19 in favor of the bill, while the Agriculture Committee voted 47-6 in favor. The goal of the CLARITY Act is to resolve the long-standing jurisdictional conflict between the SEC and the CFTC. The bill defines that certain crypto assets will be regulated as commodities under the CFTC, while others will be regulated as securities by the SEC.

Criticism and concerns

The CLARITY Act also provides limited liability protection for blockchain developers and excludes them from money transmission regulations. Future disclosure, fund segregation and conflict of interest rules are intended to protect investors from crypto fraud. However, critics express concerns. Maxine Waters warns of potential conflicts of interest, while Brad Sherman fears the law could lead to industry bailouts and regulatory arbitrage. Timothy Massad, former chairman of the CFTC, has called the act “complex” and sees it as increasing confusion rather than clarifying regulatory issues.

The CFTC will be the primary regulator of crypto and will therefore also be responsible for overseeing digital goods such as most cryptocurrencies and tokens in spot markets. It will also regulate the activities of exchanges, brokers and spot markets for non-secure digital assets such as Binance and Ethereum, and oversee the trading and custody of stablecoins on a commodity exchange. The SEC's role, on the other hand, would be limited to enforcing anti-fraud rules on stablecoins.

The CLARITY Act now moves to the full House for debate and a vote. If passed, it could be the first comprehensive law in the US to create a regulatory framework for crypto and digital assets. As the US Senate works to improve digital asset regulations, the outcome remains uncertain. Information from The shareholder and Coinpedia highlight the developments and challenges in this area.